Compensation is one of many human resource (HR) tools that organizations
use to manage their employees. [ For an organization to receive its money’s
worth and motivate and retain skilled employees, it needs to ensure that its
compensation system is not an island by itself. Not only is it important for
an organization to link compensation to its overall goals and strategies, it is
important

that its compensation system aligns with its HR strategy.
Too many organizations plan and administer their pay systems by default; or
worse, fall back on “the squeaky wheel gets the grease” practices. More than
any other area in HR, ignoring pay and performance systems can be devastating. It is a very expensive and laborious process to hire new employees,
buy back trust of current employees and renew the organization’s energy and
motivation level. By ignoring this issue, it does not go away or get better with
time. It will take extra money and valuable resources to fix the system.
Smart, successful organizations do regular planning and evaluating of their
compensation and performance appraisal systems. Because compensation
is visible and important to employees, it is critical to consistently communicate a clear message regarding how pay decisions are made. In short, a
solid pay-for-performance strategy requires that employee pay matches the
organization’s message.
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